Telangana High Court

M/S Shilparamam Arts, Crafts And ... vs Additional / Joint / Deputy / Assistant ... on 24 November, 2023

Author: P.Sam Koshy

Bench: P.Sam Koshy, N.Tukaramji

              THE HON'BLE SRI JUSTICE P.SAM KOSHY
                                      AND
              THE HON'BLE SRI JUSTICE N.TUKARAMJI

                   WRIT PETITION No.31360 of 2023

ORDER :

(per Hon'ble Sri Justice P.SAM KOSHY)

The present writ petition is filed by the petitioner assailing the

impugned order dated 31.07.2023 passed by the respondent

No.3/The Commissioner of Income-Tax (Exemptions) and the

subsequent consequential orders passed thereon.

2. Heard Sri A.V.A. Siva Kartikeya, learned counsel for the

petitioner and Sri A. Ramakrishna Reddy, learned counsel for the

respondent-Department.

3. Vide the said impugned order, the respondent No.3 had rejected

an application for condonation of delay in filing Form 10B for the

assessment year 2017-18 under Section 119(2)(b) of the Income Tax

Act, 1961 (hereinafter referred to as 'the Act').

4. The brief facts relevant for adjudication of the present writ

petition are that the petitioner which is a establishment having got

registered itself under Section 12A of the Act, submitted its income

tax returns on 31.10.2017. However, as there were certain defects,

the same was returned and revised income tax returns were furnished

on 02.11.2017. While submitting the returns, nil income was declared

claiming exemption under Section 12A of the Act. Thereafter, the

respondent No.1 initiated proceedings under Section 147 of the Act

and a notice under Section 148 of the Act is said to have been issued

on 19.09.2019 and further notice under Section 142(1) of the Act was

also issued calling upon the petitioner to submit certain additional

details. Finally an order was passed under Section 147 read with

Section 114 and Section 144B of the Act on 24.09.2021.

5. The respondent No.1 while passing the said order held that the

petitioner has failed to prove the source of cash deposited by him in

their respective banks amounting to Rs.87,13,060/- and the entire

amount was being treated as unexplained money and was added

under Section 69A read with Section 115BBE of the Act.

6. It was the contention of the learned counsel for the petitioner

that none of the notices issued including the show cause notices were

served upon the petitioner and neither was there any material

available on record to show that the notices were duly served upon

the petitioner. When the petitioner came to know about the impugned

order passed at a belated stage, he had preferred a statutory appeal

under Section 246A of the Act vide Form No.35 before the respondent

No.2/The Commissioner of Income Tax (Appeals). The respondent

No.2 had issued notice on the said appeal and the matter is still

under consideration before the respondent No.2. While the matter was

seized by the respondent No.2, the petitioner filed an application

before the respondent No.3 on 14.02.2023 to condone the delay in

filing the audit report in Form 10B for the Assessment Year 2017-18.

7. It was the further contention of the learned counsel for the

petitioner that non-filing of the audit report in Form 10B would not be

so fatal requiring initiation of proceedings so far as denial of

exemption under Section 11 of the Act. It is this application for

condonation of delay in filing of the audit report which stands rejected

vide the impugned order dated 31.07.2023 which is under challenge

in the present writ petition.

8. The contention of the learned counsel for the petitioner all along

was that filing of the audit report in Form 10B is only a directory and

not mandatory in nature. Non-filing of the same cannot be fatal to the

exemption which the petitioner is otherwise entitled under Section 11

of the Act. It was further contended there was no as such a default on

the part of the petitioner except for the fact that the audit report could

not be brought on record. According to the learned counsel for the

petitioner, there is no dispute to the fact that within the prescribed

period itself the petitioner had submitted returns and even the audit

report was prepared in time i.e. on 20.09.2017. Because of technical

reasons, it could not be uploaded and filed with the authorities

concerned and the same was ultimately uploaded on 10.04.2019. The

fact that it was uploaded on 10.04.2019 goes to show that uploading

of the audit report was done about 2.5 years before the assessment

order was passed and the same also stood uploaded well before the

assessment order was passed on 24.09.2021. In the given

circumstances taking into consideration the provisions of Section

119(2)(b) of the Act, the authority concerned ought to have taken a

liberal approach and should have condoned the delay caused in filing

of the audit report.

9. According to the learned counsel for the petitioner, the

impugned order passed by the respondent No.3 is totally arbitrary,

without proper application of mind and being passed in a mechanical

manner. It was specifically contended that the authority concerned

has not dealt with it in any manner or discussed upon any of the

grounds raised in the application under Section 119(2)(b) of the Act.

For the said reason, the prayer of the petitioner was for issuance of an

appropriate Writ in the nature of Mandamus declaring the impugned

order dated 31.07.2023 rejecting the application under Section

119(2)(b) of the Act to be arbitrary, bad in law and for an appropriate

direction to hold that the consequential decisions taken also to be bad

in law. In support of his contentions, learned counsel for the

petitioner relied upon the decisions in the case of MADHU DADHA vs.

ASSISTANT COMMISSIONER OF INCOME TAX 1, COMMISSIONER

OF CUSTOMS (IMPORT), MUMBAI VERSUS M/S. DILIP KUMAR

(2009) 317 ITR 458 (Mad)

AND COMPANY & ORS. 2 so also the case of M/s. Myadam Kishan

Rao Charitable Establishment vs. The Commissioner of Income

Tax (Exemption) 3 of this Court on the question of alternative remedy.

10. Per contra, learned counsel for the respondent-Department

referring to the assessment order dated 24.09.2021 for the

Assessment Year 2017-18 contended that the petitioner was issued

with the notices at every stage of the proceedings. In addition, apart

from issuance and serving of notices through e-mail through the

Income Tax Business Application (ITBA) portal, all these notices were

also issued and served upon the petitioner through speed post. Thus,

the contention of the petitioner that they are not being served

effectively is not worth accepting and is far from truth deserving

rejection of the said contention.

11. It was the contention of the learned counsel for the respondent-

Department that the petitioner was issued and served with the notices

both electronically and also physically and if the petitioner chose not

to contest the case or to respond to any of the notices so issued, the

petitioner cannot be permitted to agitate the same at this belated

stage and having done at this inordinately belated stage without any

justification and plausible explanation, the respondent-Department

CIVIL APPEAL NO.3327 of 2007 of Supreme Court of India

WP 24005 of 2023 dated 30.08.2023 of High Court for the State of Telangana

cannot be blamed for having rejected the application for condonation

of delay.

12. Learned counsel for the respondent-Department referring to the

impugned order contended that the authority concerned has rightly

considered the application on its own merits and keeping in view the

circulars of the Government of India so far as delay and condonation

of delay is concerned and the impugned order cannot be found fault

with. In the absence of any representation by the petitioner before the

authority concerned and also in the absence of any response from the

petitioner side and also without there being enough materials

available for the authority concerned, they could not have done

anything but what has been done while dismissing the application

under Section 119(2)(b) of the Act. According to the learned counsel

for the respondent-Department, the petitioner had ample opportunity

if he wanted to upload or made available the audit report and having

not done so goes to establish the fact that the petitioner has

deliberately not shown any keen interest on the proceedings so

drawn. Thus, he would not be entitled for any sympathetic treatment

or anything as such. For the aforesaid reason, the learned counsel for

the respondent-Department prayed for rejection of the writ petition

holding it to be devoid of merits.

13. Learned counsel for the respondent-Department in support of

his contentions had relied upon the decisions in the cases of

ASSISANT COMMISSIONER (CT) LTU, KAKINADA Versus GLAXO

SMITH KLINE CONSUMER HEALTH CARE 4 and yet another

decision of the Division Bench of this Court in M/s. Zoos and Parks

Authority of Telangana vs. The Commissioner of Income Tax

(Exemptions) 5 to be adopted in an appropriate case.

14. Having heard the contentions put forth on either side and on

perusal or records, for proper adjudicating the dispute raised in the

present writ petition, it would be relevant at this juncture to take note

of the contents of the impugned order itself which for ready reference

is reproduced herein under:

" With reference to the assessee's application for condonation of delay in filing Form 10B for the A.Y.2017-18, cited under reference 1 above, it is to state that the assessee has filed Form 10B belatedly. The assessee has been requested to furnish certain information vide above cited reference 2, justifying its application for condonation of delay. However, the assessee has not submitted sufficient reason which prevented the assessee from filing the same, within the due date.

As per Board's circular, "The Commissioner of Income-tax are authorized to admit and dispose off such applications for condonation of delay u/s.119(2)(b) of the Act where, the assessee was prevented by reasonable cause from filing such application within the stipulated time.

In view of above reasons, it is concluded that the application filed by the assessee for condonation of delay u/s 119(2)(b) in filing Form 10B for the assessment year 2017-18 is hereby rejected."

(2020) 19 Supreme Court Cases 681

WP 8794 of 2023 dated 04.04.2023 of High Court for the State of Telangana

If we look into the contents of the above said impugned order, what is

apparently reflected is that the impugned order is cryptic. Cryptic to

the extent that the order is totally unreasoned and non-speaking

order.

15. Further to deal with issue, it would now be necessary to take

note of the statutory provisions dealing with the condonation of delay

which stands decided by the respondent-Department and which is

under challenge in the present writ petition. Section 119(2)(b) of the

Act empowers the Commissioner to entertain an application for

condonation of delay which for ready reference is being reproduced

herein under:

"Section 119(2)(b)- The Board may, if considers it desirable or expedient so to do for avoiding genuine hardship. In any case or class of cases ,by general or special order, authorise any income-tax authority, to admit an application or claim for any exemption, deduction, refund or any other relief under this Act after the expiry of the period specified under this Act for making such application or claim and deal with the same on merits in accordance with law."

A plain reading of the aforesaid provision of law would clearly indicate

that the intention of the framers of the law was to provide a liberal

approach where there is a delay occurred. What is necessary to be

considered at this juncture also is the fact that the petitioner is a

registered establishment under Section 12A of the Act. Section 12A of

the Act provides tax exemption to charitable trust that is registered

with the Income Tax Department. So far as registration is concerned,

there no quarrel on the same. The dispute in the present case is only

in respect of the assessment order for the Assessment Year 2017-18.

16. The admitted factual matrix from the facts of the case is that

the return of income was filed by the petitioner for the Assessment

Year 2017-18 on 02.11.2017. Before filing of the said return itself, the

accounts of the petitioner were got audited and the audit report was

prepared well in time on 20.09.2017. The due date for filing of the

return was on or before 31.10.2017 and the petitioner herein did file

his return on 31.10.2017. However, on account of certain defects

detected, the same was returned and revised return was filed on

02.11.2017. Thus, the return stands submitted within the time.

However, there was a requirement for uploading of the audit report.

The audit report meanwhile was uploaded though at a belated stage

on 21.02.2019, nonetheless the uploading of the audit report was

much before (before 2.5 years) the assessment order dated

24.09.2021 was passed. It is in this factual backdrop that the

application for condonation of delay filed by the petitioner ought to

have been decided by the authority concerned.

17. Now if we look into the statutory provisions, what is reflected is

that the provisions under Section 119(2)(b) has been enacted with a

specific purpose empowering the authorities concerned to condone

the delay on the part of the assessee in furnishing or in submitting of

the returns or an appropriate application within a reasonable period

of time. The said provision of law does not provide for any specific

period of time within which the application for condonation of delay

needs to be filed. The said provision has also been enacted to ensure

that genuine hardship which an assessee may face can be avoided by

condoning the delay if any that has occurred and an appropriate

application seeking for condonation of delay is filed.

18. The High Court of Gujarat in the case of Sarvodaya

Charitable Trust v. Income Tax Officer. (Exemption) 6 dealing with

similar issue under the provisions of law in paragraph Nos.31 and 32

held as under:

"31. Having given our due consideration to all the relevant aspects of the matter, we are of the view that the approach in the cases of the present type should be equitious, balancing and judicious. Technically, strictly and liberally speaking, the respondent no.2 might be justified in denying the exemption under section 12 of The Act by rejecting such condonation application, but an assessee, a public charitable trust past 30 years who substantially satisfies the condition for availing such exemption, should not be denied the same merely on the bar of limitation especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.

32. We may also refer to the decision of this Court in CIT v. Gujarat Oil and Allied Industries Ltd. [1993] 201 ITR 325 (Guj.)., wherein it is held that the provision regarding furnishing of audit report with the return has to be treated as a procedural proviso. It is directory in nature and its substantial compliance would suffice. In that case, the assessee had nto produced the audit report along with the return of income but produced the same before the completion of the assessment. This Court took the view that the benefit of exemption should not be denied merely on account of delay in furnishing the same and it is permissible

[2021] 124 taxmann.com 75 (Gujarat)

for the assessee to produce the audit report at a later stage either before the Income-tax Officer or before the appellate authority by assigning sufficient cause."

19. The High Court of Gujarat further in the case of

COMMISSIONER OF INCOME-TAX v. GUJARAT OIL AND ALLIED

INDUSTRIES 7 held as under:

"In our view, the aforesaid reasoning of the Allahabad High Court and the Patna High Court would squarely apply to the facts of the present case. The provision about furnishing of the auditors' report along with the return has to be treated as a procedural provision, directory in nature, and its substantial compliance should suffice, meaning thereby that such report should be made available by the assessee to the Assessing Officer latest when the question of framing of assessment is taken up by the Income-tax Officer and when he applies his mind to the claim of the assessee and if by that time, the assessee has put his house in order and has furnished the report of the auditor for supporting the return, he can be said to have satisfied the requirement of section 80J(6A) of the Act."

20. A similar view is available from the High Court of Punjab and

Haryana in the case of COMMISSIONER OF INCOME TAX v.

SHAHZEDANAND CHARITY TRUST 8, where again the Division

Bench of High Court of Punjab and Haryana dealing with similar facts

and circumstances of the case referring to the circular of the Income

Tax Department itself held as under:

"The provisions of section 80J(6A) and section 12A of the Act are pari material. The ratio of the law laid down in CIT v. Jaideep Industries [1989] 180ITR 81 (P & H) would have been applicable to the facts of the present case as well had the Central Board of Direct Taxes not

[1993] 201 ITR 325 (Guj)

228 ITR 292(P&H)

issued the circular dated February 9, 1978, reproduced in the earlier part of the judgment. As per the circular it is not mandatory under section 12A(b) to file the audit report along with the return of income. Normally, a charitable or religious trust or institution is expected to file the auditor's report along with the return but in cases where for reasons beyond the control of the assessee some delay has occurred in filing the said report, the Income-tax Officer, for reasons to be recorded, has been authorized to condone the delay in furnishing the auditor's report and accept the same at a belated stage. It has been clarified that the exemption available to the trust under section 11 may not be denied merely on account of delay in furnishing the auditor's report. The word ''shall" occurring in section 12A cannot, under the circumstances, be read as a "must" making it mandatory for the trust to furnish the auditor's report along with the filing of the return. If for certain unavoidable circumstances, the assessee is unable to furnish the auditor's report along with the return then the same can be furnished at a later date with the permission of the Assessing Officer who may permit the assessee to do so after recording his reasons for so doing.

Counsel appearing for the Revenue then argued that as per the circular, the auditor's report could only be furnished up to the stage of framing of assessment as the power to condone the delay for accepting the auditor's report at a later date has only been given to the Income-tax Officer and not thereafter, i.e., at the appellate stage. We find no merit in this submission. The Central Board of Direct Taxes by issuing the circular dated February 9, 1978, has treated the provisions regarding furnishing of the auditor's report along with the return to be procedural and, there-fore, directory in nature. By showing sufficient cause, the auditor's report could be produced at any later stage either before the Income-tax Officer or before the appellate authority."

21. Coming to the decisions relied upon by the learned counsel for

the respondent-Department, those decisions were rendered under

entirely different contextual background and thus in both the cases it

was not a situation where the income tax return was filed and the

audit report also stood uploaded more than 2.5 years much before the

Assessing Officer had passed the assessment order. Therefore, the

said judgments cannot be applied in a straight jacket manner to the

facts of the present case.

22. For the aforesaid reasons, we are inclined to allow the writ

petition setting aside the impugned order dated 31.07.2023. As a

result, the consequential order passed subsequent to the rejection of

the application under Section 119(2)(b) of the Act would also get